Article 52. Preparing for the Loss of our Manufacturing Base to Global Markets
A few years ago Ross Perot in his bid for the Presidency predicted that there would be a “giant sucking action” as manufacturing jobs fled the country due to global competition. The US some years ago lost the steel industry completely. I see the same thing now occurring in our best paying industries primarily automotive. This is occurring slowly due to the buildup over time of pressure factors namely the rise in employee health care costs, employee retirement obligations and massive foreign competition. A few years ago General Motors took a risk in China and built a plant to manufacture Buicks. The Buick is now the most popular luxury car in China. In time GM will have to stop manufacturing Buicks in the US and start importing them from China. The US customer will not know the difference. We are nearing the time when high paying middle class manufacturing jobs will be no more. Fifteen years ago the threat to our manufacturing base was mainly from Japan due mainly to their superior manufacturing methods. But today global manufacturing is threatening Japan as well with cheaper labor. Lay-offs were almost unheard of in Japanese manufacturing until recently.
To understand what is happening it is necessary to go back to the end of World War II. The USA was one of the few industrial developed countries with its manufacturing infrastructure in fact most had been destroyed during the war. It took nearly twenty years for Japan and the other European developed countries to rebuild their industrial infrastructures. Industrial infrastructure means having the skilled workers, physical plants, capital investment, and a network of suppliers. The market economies also had to grow to be able to afford the manufactured products. What happened was that the Japanese concentrated on implementing new manufacturing quality techniques while the US and Europe continued their inefficient methods. It is necessary to note that until 1990 the Soviet Union and China did not have a well-developed industrial infrastructure partly because they were without a market economy. Since then China has emerged with a fully developed industrial infrastructure and a market economy. India will probably be the next major country to develop its industrial infrastructure. These two countries will be able to manufacture nearly all of the products used in the world and probably will for many years because of their cheap labor. The sad thing is that there is almost nothing that other more developed countries can do. Most actions to prevent this from happening by government have not prevented it and have actually been harmful.
What this means for government the loss in tax revenue from manufacturing but also health care costs is being transferred from industry to government. The airlines industry has recently set a precedence for eliminating its retirement health care obligations transferring them to the federal government and soon most embattled industries will have to follow.
What should not be done? Don’t try to legislate trade protection. This can only fail because the American consumer will not continue to pay more for their goods than others in the world markets. Although American consumers continue to pay three to four times the world price for sugar because of import restrictions they will not accept this as a general policy.
What can be done? States should take steps now to promote research and development of new technologies for products and health care. There should be a cradle to grave education policy. Emphasis should be placed on programs such as Parents as Teachers for pre-kindergarten children. Heavy emphasis should be placed on math and science during elementary and secondary education. Continuing advanced education should be encouraged and funded. The No Child Left Behind Program should include a no child held back policy for our brightest students. The state’s agriculture and other resources should be developed and supported. Beyond this there is little that can be done, as the world becomes a very competitive place.
